EMERGING MARKETS-Asia's currencies and stocks rise after Fed sticks to dovish stance

  • Reuters
  • Stock Market News
EMERGING MARKETS-Asia's currencies and stocks rise after Fed sticks to dovish stance
Credit: © Reuters.

* Indonesia, Taiwan central bank meetings on Thursday

* Malaysia govt announces $4.87 bln stimulus

* Indonesia's rupiah up 0.4%

March 18 (Reuters) - Indonesia's rupiah led Asia's emerging currencies higher on Thursday and stocks rallied after the Federal Reserve pledged to keep interest rates near zero for a while yet despite an expected rise in inflation.

Stock markets in the Philippines .PSI , South Korea .KS11 and Singapore .STI all climbed around 1%, clinging to the news that the Fed won't be winding back stimulus despite a stronger U.S. economic outlook and inflation which is set to eclipse the central bank's 2% target. 10-year Treasury yields US10YT=RR continued to rise. They were trading at 1.6726%, just shy of a 13-month high hit before the Fed's announcement, helping the dollar recoup some of its earlier losses and limiting gains in Asia's risk-sensitive currencies.

Analysts at DBS view the post-Fed dollar sell-off as investors trying to make some profit on gains made in the lead up to the meeting.

Asia's higher-yielding bonds also largely stuck to tight ranges.

U.S. yields have risen in recent months on expectations that a faster rebound in the U.S. economy, buoyed by fresh stimulus and a vaccination programme, could fuel inflation and prompt the central bank to begin unwinding ultra-loose monetary policy.

But Citi analysts said a general outperformance of the U.S. economy and higher inflation, among other factors, "may keep (the) U.S. curve steep and prevent lasting relief for Asia fixed income," Citi analysts said.

Central banks in Indonesia and Taiwan are due to hold policy meetings later on Thursday, with both expected to keep interest rates steady. rupiah IDR= advanced 0.4% on the dollar and stocks .JKSE were up 0.9% after the Fed overnight and ahead of Bank Indonesia's (BI) decision, due at around 0700 GMT.

Bank Indonesia is expected to keep its 7-day reverse repurchase rate IDCBRR=ECI unchanged at a record low of 3.50%, after a bout of monetary stimulus during the pandemic and as the currency has recently come under pressure. BI has slashed rates by 150 basis points over six cuts since the pandemic started. is worth watching for the rhetoric given that it may be more grudgingly on hold," Mizuho Bank said of BI, that has prioritised currency stability.

Stocks in Taiwan .TWII climbed close to 1% and the dollar TWD=TP was marginally higher.

The rising local dollar, which has strengthened over 6% in the year, has become a source of concern for the export-reliant economy. Taiwan's economic growth last year was supported by global demand for its tech products from an increasing number of people working from home during the pandemic.

Taiwan's central bank governor has also acknowledged the island may be labelled a currency manipulator by the United States, having met Washington's three main criteria for such a decision. Last week, data showed a large spike in currency intervention spending last year. Malaysia, stocks .KLSE were up half a percent and the ringgit MYR= nearly a third of a percent, after the government unveiled a fresh round of stimulus on Wednesday, totalling 20 billion ringgit ($4.87 billion). Thailand's 10-year government bond yields down 4 basis points to 1.8%

** Malaysia to sell 4.5 bln ringgit government bonds Jardine Matheson Holdings Ltd JARD.SI , Genting Singapore Ltd GENS.SI and CapitaLand Integrated Commercial Trust CMLT.SI led gains in Singapore

Asia stock indexes and currencies at 0347 GMT COUNTRY

FX RIC

FX

FX

INDEX

STOCKS STOCKS

DAILY % YTD %

DAILY % YTD % Japan

JPY=

-0.01

-5.15 .N225 1.63

10.78 China

CNY=CFXS +0.16

+0.52 .SSEC 0.55

-0.25 India

INR=IN

+0.00

+0.72 .NSEI 0.00

5.29 Indonesia

IDR=

+0.38

-2.30 .JKSE 0.85

5.88 Malaysia

MYR=

+0.29

-2.12 .KLSE 0.49

0.35 Philippines PHP=

-0.10

-1.25 .PSI

1.39

-6.74 S.Korea

KRW=KFTC +0.52

-3.39 .KS11 0.98

7.09 Singapore

SGD=

-0.10

-1.51 .STI

1.19

10.65 Taiwan

TWD=TP

+0.05

+0.69 .TWII 0.75

10.90 Thailand

THB=TH

+0.13

-2.51 .SETI 0.81

8.98 ($1 = 4.1050 ringgit)

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